Financial aid, such as student loans, is an excellent resource for students who need assistance managing tuition and other educational expenses. Borrowers who want to refinance a student loan should understand the advantages and disadvantages before weighing their options.

Pennco Tech offers a wide range of vocational programs at campuses in Pennsylvania and New Jersey. Here, we offer insight into what it means to refinance a student loan, as well as the pros and cons.

What Is Student Loan Refinancing?

Before making any important financial decisions, such as refinancing your student loans, it’s wise to understand what it entails first. Student loan refinancing is when a lender pays off your existing student loans and gives you a new loan with new terms. It’s important to note that refinancing is only available through private lenders. Not everyone qualifies for student loan refinancing.

Advantages of Refinancing Student Loans

The most well-known advantage of refinancing student loans is receiving a lower interest rate. A lower interest rate can decrease the monthly payment amount and help borrowers pay off the loan faster. With lower monthly payments, borrowers free up cash that they can use toward other expenses.

In addition, when borrowers choose to refinance, they have more control over their payment plan. Once qualified, they can choose the new term of the loan. That gives borrowers control in deciding how quickly they want to pay off their loans. A shorter loan term means higher monthly payments, while a longer timeframe means lower loan payments.

Another reason individuals choose to refinance their student loans is to group their payments. Those borrowing from multiple lenders are asked to provide more than one loan payment. Keeping track of various loan payments can be challenging. Refinancing offers borrowers the benefit of streamlining payments instead of owing multiple monthly payments to many lenders.

Disadvantages of Refinancing Student Loans

While there are several desirable advantages to student loan refinancing, there are potential drawbacks that borrowers should note. The biggest downside to refinancing is giving up the protections you receive with federal loans. You lose specialized repayment plans and potential loan forgiveness when refinancing with a private lender. To make up for this loss, some private lenders offer alternatives, such as deferment in the case of unemployment or economic hardship.

Another potential drawback is that refinancing doesn’t guarantee a lower interest rate. Your credit score largely influences the rate you receive. The better your credit score is, the better the interest rates you can access. Borrowers with less-than-ideal credit may find less-than-favorable rates.

Borrowers must use caution when refinancing their student loans, as it can lengthen the time it takes to pay them off. That is most commonly the case for borrowers who are more than halfway through paying off their loans. While refinancing can give you lower monthly payments for the rest of the term, it can consequently stretch out the time it takes to pay them off completely.

Financial Services at Pennco Tech

At Pennco Tech, we are committed to helping our students achieve their goals. In addition to career-focused vocational school programs, we are pleased to offer students financial aid services and student loan counseling to help expand their financial literacy, and make furthering their education more feasible.

*Financial Aid available only to those who qualify.

More than half of the students enrolled at Pennco Tech qualify for financial assistance. The financial aid team helps guide students through the process and discusses exactly what their financial aid package involves. Qualifying students at Pennco Tech could be eligible to receive different types of financial aid such as:

• Grants
• Scholarships
• Stafford loans
• Private educational loans
• Veterans’ educational benefits
• Third-party contracts
• Sallie Mae student loans

To help students better navigate financial management, Pennco Tech created the student loan counseling department. The purpose of this department is to help students understand the obligations and responsibilities that go with student loans, as well as teach them the necessary steps to pay them off. Our goal is to help students avoid defaulting on loans, becoming delinquent, or falling behind in payment schedules.

Find Out More About Student Loan Refinancing

Current, past, and future students of Pennco Tech can gain valuable information about tuition, financial aid, student loans, and more. We extend our services and guidance to students at both campus locations in Blackwood, New Jersey, and Bristol, Pennsylvania. With the resources available at Pennco Tech, students are encouraged to finish their vocational school program and achieve trade career success.

Students interested in learning more about financial aid or student loan refinancing should contact us today.